2008 Financial Crisis

The financial crisis of 2008 is viewed as the second most severe and long lasting economic downturn after the Great Depression in nineteen thirties. Majority of big financial institutions almost collapsed during this period. However, national governments through bank bailouts acted quickly to save these institutions from collapse. Nevertheless, the stock markets around the globe fall drastically. Moreover, real estate pricing was severely affected by the crisis. As a result most people were left unemployed while the lucky ones who retained their jobs experienced drastic fall in income.

The economic down turn played a significant role in decline in wealth of consumers, collapse of huge businesses and decline in financial activities. As a result, the world economy experienced drastic recession which adversely contributed to the debt crisis in the European sovereign society. During this period, the economic activities around the globe decline, as the international business went down and bank credits services tightened.

Causes of the 2008 Financial Crisis

According to commission for Financial Crisis Inquiry, the 2008 crisis was as a result of widespread failure by the financial supervision and regulation and corporate risk management which play significant roles in the financial institutions. Through uncontrolled credits and risky investments, financial institutions found themselves in an uncertainty and panic situations, which threaten their existence and increased the risk of collapsing.

The collapse of the real estate prices in United States in 2004, led to fall of securities attached to them that resulted to collapse of financial institutions around the world. The economic crisis was greatly influenced by complex policies which reinvigorated most people to acquire new homes through easy access to loans and mortgages. However, these policies prioritized short term valuation rather than long term valuation of the real estates, a fact that left many buyers and sellers with many questions on future compensation structures. Furthermore, the insurance companies and banks did not have sufficient capital to fulfill the financial obligations they were around the globe and hence resulting to severe losses in the stock market securities.

Recovery from the 2008 Financial Crisis

The central banks and national governments acted extraordinary through fiscal stimulus, institutional bailouts and expansion of the monetary policy to curb the situation. In other nations such as United States, recovery and reinvestment policies were enacted. Through the immediate adoption of monetary policies and financial institution bailouts, the severities of the economic crisis were lessened. Regulatory reforms were as well enacted in various nations, especially in United States were the crisis was more severe to eliminate any recurrence chances.